McCord v. Martin

The action was begun in the superior court of the county of Santa Clara on the 22d of December, 1913. On the eighth day of October, 1914, an amendment to the complaint was filed to which the defendant, William Lindemann, filed a demurrer. The demurrer was sustained without leave to amend on the twenty-eighth day of December, 1914, and thereafter, on the eighteenth day of January, 1915, judgment was entered in favor of defendant, Lindemann. An appeal from such judgment was thereafter taken by the plaintiffs, and the judgment was reversed by the district court of appeal of the first district. (McCord v. Martin, 34 Cal. App. 129 , [ 166 Pac. 1014 ].) The remittitur was filed in the court below on the sixth day of August, 1917, and thereafter an order was made by said superior court that the defendant answer within ten days after notice of said order. Within time the answer was filed, and thereafter, on motion of plaintiffs the action was transferred for trial to the superior court of Kings County. On January 15, 1918, the plaintiffs gave notice of a motion to strike out portions of the answer of defendant Lindemann, including paragraph 16 thereof, which set up as res judicata a judgment of dismissal in an action' between the same parties entered by the superior court of the city and county of San Francisco on the sixteenth day of May, 1913, as follows:

“It appearing to the court from the stipulation filed herein on the 12th day of May, 1913, signed by the attorneys of record of all of the respective parties in interest, that plaintiffs (naming them), through their attorneys, Messrs. Bradley & Bradley and F. H. Gould, and that defendant and cross-complainant J. D. Martin, through his attorneys, Messrs. Morrison, Dunne & Brobeck, and that

defendant William Lindemann, through his attorney Alfred Daggett, and that cross-defendants (naming them), through their attorneys, Messrs. Bradley & Bradley and F. H. Gould, have, and each of them has, stipulated that the above-entitled action and every part thereof shall be dismissed as against each and all of the parties to the above-entitled action, and that all of said parties have further stipulated that each and all of the parties to said action shall pay their costs of suit incurred by them respectively; and each and all of the above-named parties, through their said respective attorneys having stipulated in open court on the 12th day of May, 1913, that said action and every part thereof shall be dismissed pursuant to the terms of the aforesaid stipulation on file herein, and good cause appearing therefor.

“Now therefore, it is ordered that the above-entitled action and every part thereof be, and the same is hereby dismissed as to all the parties to said action.

“It is further ordered that each and all of the above named plaintiffs and each of said defendants and said eross"complainant and each and all of said cross-defendants pay his or their own costs incurred by him or them respectively in said action.

“It is further ordered that this judgment of dismissal be duly entered by the Clerk.”

Paragraph 17 of said answer, to the effect that said judgment has never been reversed, modified, or appealed from, and has become final, and that the cause of action therein was the same as the action admitted to be set up by the complaint herein, was also stricken out.

The plaintiff, J. W. McCord, having died, his administratrix was substituted by order of said court. The cause was tried without a jury, and on the first day of March, 1919, the court filed its findings of fact and conclusions of law, and judgment was entered thereon in favor of plaintiffs as against William Lindemann on the eleventh day of March, 1919. Two days later the defendant Lindemann gave notice of a motion to enter a different judgment, which motion was denied on the twenty-fourth day of March, 1919. The proceedings upon this motion have been preserved in a bill of exceptions. Defendant Lindemann has appealed from said judgment and said order denying his said motion.

“That thereafter said proposed purchaser, who was said Cameron, upon being notified by defendants that said stock had been placed in escrow as alleged, went to Hanford and in accordance with a secret agreement with defendants brought all the said stock so placed in escrow, for eight

Being stated concisely, then, the only cause of action appearing in the complaint rested upon these facts: Both defendants Martin and Lindemann falsely represented to other stockholders that if they would pool their shares of stock they could sell to a certain purchaser for five dollars per share, said stockholders believed and acted upon said representations; whereas, said Martin and Lindemann knew that the stock could be sold for eight dollars per share and had an agreement to that effect, and did actually consummate the sale for that price, but the other stockholders in accordance with the terms of said pooling arrangement received only the sum of five dollars per share, said Martin and Lindemann appropriating to their own use the balance of some ninety-one thousand dollars. If these facts had been shown and found it could hardly be seriously argued that plaintiffs were not entitled to a judgment against defendants. The proper legal characterization of the transaction might be in some doubt, but at any rate the principles of equity as formulated in the code and administered by the courts are ample to reach and defeat such iniquitous conduct. But the trouble is, the trial court found that Cameron agreed with Martin “to purchase not less than twenty thousand shares for a'price not exceeding five dollars per share; that Martin then communicated to a few of plaintiff’s assignors the information, and they in turn conveyed it to the other stockholders; that defendants did not devise any scheme for effecting a sale of the interest of said Martin & Dudley in said mining claims and said Lake Shore Oil Company stock and the stock of Lost Hills Mining Company to Cameron, and Lindemann at no time knew of the plans or expectations of the firm of Martin & Dudley to sell the interest of said Martin & Dudley in said claims to Cameron. ’ ’ It is further found in reference to a certain sum of money that was paid by Martin to Lindemann that it “was paid to Lindemann not in pursuance of the scheme alleged in paragraph VII of the complaint, but was paid to Linde

It is quite apparent that thus is presented an entirely different story from that set forth in the complaint. It is sufficient to say that the so-called fraud herein does not at all involve any fraudulent representation" to induce the other stockholders to pool their stock nor the actual sale of said stock for a price in excess of five dollars per share— the two essential elements that characterized the cause of action as set forth. [1] But it is well settled by a long line of decisions in this state that “the plaintiff must recover, if at all, upon the case made by the pleadings, and not upon a case which may be developed by the proofs.” (Kredo v. Phelps, 145 Cal. 526 , [ 78 Pac. 1044 ].)

[2] This principle would be fatal to the judgment were it not for the well-recognized rule of practice that, where a cause is tried upon the theory that a certain fact is in issue and evidence thereon is received without objection, it is too late thereafter to complain that no such issue was presented. (Slaughter v. Goldberg, Bowen & Co., 26 Cal. App. 318 , [ 147 Pac. 90 ]; Howard v. Hobson Co., 38 Cal. App. 445 , [ 176 Pac. 715 ].)

In the absence of the evidence at the trial and in view of said finding of the court, the presumption being in favor of the regularity of the proceedings, we must assume that such was the action of the parties.

In Ryder v. Bamberger, 172 Cal. 791 , [ 158 Pac. 753 ], it was held that even “directors and officers of a corporation have the right to purchase the shares of the stock of other

Hallidie v. First Federal Trust Co., 177 Cal. 600 , [ 171 Pac. 431 ], involved an action “to compel an accounting of dividends and other proceeds realized by the purchaser, on the ground that the sale had been induced by fraudulent misrepresentations made 'by Bnginger to Hallidie, who was acting in the transaction for California Wire Works.” It was contended by appellant that, even if there was no active misrepresentation by Bnginger, he was chargeable with constructive fraud because of his failure to disclose all the facts within his knowledge. The supreme court, however, said: “But the evidence did not show any such relation between the parties as to impose upon Bnginger the stringent obligations of a trustee. While Bnginger was a director and general manager of the Wire Cloth Company, it must be remembered that Hallidie himself was not only a director, but the president of the corporation. In negotiating for the stock, the two stood on equal terms, and neither owed the other any special duty of a fiduciary nature. This being the relation between the parties, the fact, if it be a fact, that the stock was, at the time of the purchase, worth very much more than the price paid, does not furnish a ground for setting the transaction aside.”

Other eases cited announcing a similar doctrine are Bacon v. Soule, 19 Cal. App. 428 , [ 126 Pac. 384 ]; Hooker v. Midland Steel Co., 215 Ill. 444 , [ 106 Am. St. Rep. 170 , 74 N. E. 445 ]; Tippecanoe County Commrs. v. Reynolds, 44 Ind. 509 , [ 15 Am. Rep. 245 ]; Walsh v. Goulden, 130 Mich. 531 , [ 90 N. W. 406 ].

[4] Nor do we think that appellant is liable upon the theory that all signing the escrow agreement were joint adventurers. In 23 Cyc. 453, it is said: “ A joint adventure does

The stockholders at all times owned their respective shares of stock severally and individually and at no time was there a joint interest either in the stock or the proceeds thereof.

The cases cited by respondents in view of their respective facts do not,- in our judgment, satisfactorily meet the situation. Detailed consideration of only one of these, Cole v. Bacon, 63 Cal. 571 , is invited by respondents as they seem to think it is “very similar to the ease at bar”; but appellant aptly calls attention to the fact that therein Bacon was the avowed agent of the plaintiffs, who were stockholders in a certain corporation, and as such agent he undertook to sell the stock of plaintiffs for the highest price obtainable. He did sell said stock for two hundred and fifty thousand dollars, of which he secretly retained all except forty-seven thousand seven hundred dollars, and he falsely represented to plaintiffs that this sum was the price actually paid. The action was brought to recover the balance and a judgment in favor of plaintiffs was sustained by the supreme court. That an agent could thus defraud his principal without rendering himself legally liable to an accounting would, of course, not be urged by anyone familiar with the law. It may be added that the case here as presented by the complaint is “very similar” to Cole v. Bacon, supra, but the case as presented by the findings is quite dissimilar.

[5] We think, also, that the court erred in striking out the defense of res judicata. It is stated by appellant that at the trial the facts were stipulated to be as alleged in said defense.

In Merritt v. Campbell, 47 Cal. 542 , it was held that “a judgment of dismissal, rendered upon the oral agreement of the parties in open court with a stipulation that each party pay his own costs, is a bar to another suit afterward brought upon the same cause of action.” Such dismissal was declared to be equivalent to retraxit as known at common law, which, being “an open and voluntary renunciation of his suit in court,” the plaintiff was not at liberty to renew. Respondents, however, claim that said decision is not controlling because therein “the parties appeared in court by their attorneys and orally agreed to a dismissal, each party

As to Rincon etc. Co. v. Anaheim Union Water Co., 115 Fed. 543 , cited by respondents, appellant is justified in Ms comment that, first, the interpretation by a federal court of a state statute is not binding upon the state courts (People v. Linda Vista Irr. Dist., 128 Cal. 477 , [ 61 Pac. 86 ]), and second, that the dismissal therein was not made in open court by stipulation of the attorneys of both parties, but only on motion of defendant’s counsel, and the court based its ruling upon subdivision 2 of section 581, and not upon section 582, of the Code of Civil Procedure, as was done in the Merritt case.

[7] Where the parties appear in open court and stipulate for a dismissal the situation is not covered by said section 581, but a judgment entered thereon is a judgment on the merits as contemplated by said section 582.

Some other questions are discussed by counsel but we deem it unnecessary to notice them specifically. As we view the matter, the findings do not support a judgment for plaintiffs but require a conclusion in favor of defendant Lindemann. When such is the case, the proper proceeding is to direct judgment for the defendant. (Dargie v. Patterson, 176 Cal. 714 , [ 169 Pac. 360 ]; Code Civ. Proc., sec. 53.)

The judgment is reversed, with direction to enter judgment upon the findings for defendant Lindemann for his costs.

Nicol, P. J., pro tern., and Hart, J., concurred.

A petition to have the cause heard in the supreme court, after judgment in the district- court of appeal, was denied by the supreme court on July 23, '1920, a majority of the Justices not having assented to the granting thereof, and Lawlor, J., and Olney, J., voting for the granting of said petition, •